Drumbeat: January 15, 2010

LONDON (Reuters) - Asia's thirst for oil from outside the region hit record highs late last year and was expected to keep growing in 2010 as economic strength, led by China and India, offsets still sluggish demand elsewhere.

Chinese and Indian state-owned oil companies have taken advantage of weak U.S. demand for West African crude, buying record amounts from Nigeria, Angola, Congo and Equatorial Guinea in January, a trend that traders said will last.

"Asian imports from West Africa have hit record highs already in January and I can tell you having spoken to the buyers this is going to get bigger later this year," one West African crude oil trader said.

The signs are everywhere that oil is headed for stratospheric highs - $200, $250 or even $300 a barrel. Some of these signs are just plain obvious. But even the subtle indicators are telling us that some very expensive energy costs headed our way.

An unresolved row over Russian oil supplies to Belarus escalated again with Moscow reducing flows to Belarussian refineries, traders said today, in a move likely to revive fears of supply disruptions to Europe.

With 2009 in the books, we are providing thoughts and forecasts for the land rig market in the year ahead. This is the sixth and final installment in a series of articles that review the 2009 and preview the 2010 jackup, floater and land rig markets.

In Chesapeake's second-quarter 2009 operational update, the company identified its Colony Granite Wash and Texas Panhandle Granite Wash plays as "the two highest rate-of-return plays in the company." In the third-quarter report, the company estimated the Colony's internal rate of return at 141%, based on selling the natural gas at $7 and the oil at $70.

Kazakh state oil and gas company KazMunaiGas said Friday it has proposed that the consortium developing Kazakhstan's largest oil field Kashagan, in which it is involved, cuts costs by about $3 billion in 2010.

Kyrgyzstan will get energy independence in the nearest future, Kurmanbek Bakiev President of Kyrgyzstan said Friday at a session of the Chui regional administration.

Increasing volume of water in Toktogul water reservoir and launch of Kambarata-2 hydro-power plant will, in president’s view, contribute to the process. “In the next one-two years the republic will be able to export electricity to its neighbors,” Bakiev said.

Pilipinas Shell Petroleum Corp. warned that the Bureau of Customs’ plan to seize its raw materials and product imports will force it to shut down its Batangas refinery, leading to a fuel shortage.

Citing Section 1508 of the Tariff and Customs Code, the Customs said it is authorized to seize all shipments of Shell arriving in February 2010 to May 2010 amounting to P43 billion to answer for the alleged deficiency in tax assessments covering its importation of Catalytic Cracked Gasoline (CCG) and Light Catalytic Cracked Gasoline (LCCG) from 2004 to 2009.

A nuclear reactor project of the federally-owned Tennessee Valley Authority — declared officially dead since 2006 — have been promoted from “terminated” status to “deferred” by the Nuclear Regulatory Commission.

Of the more than 100 reactor construction projects abandoned during the 1980s and 1990s, this is the first to take such a step, according to the regulatory agency, which announced the change on Thursday.

I think it is important also to distinguish between several kinds of cities. Just as I’ve written before that there are suburbs and suburbs, there are cities and cities. There are cities I think have little or no future in the face of climate change and energy depletion, and ones I think have quite a bright future. How do you know which kind of city yours is? Well, there are a few questions to ask yourself:

1. Was this a major city before 1900? This is an important question if you are interested in your city’s future. As a general rule, the best way to evaluate a city’s long term future in the face of depletion and the ability to produce less carbon is to ask “Back when we used less energy, did people want to live here? If so, why? If not, why not?” If, for example, your city is a major port city, or connected by waterway to a major port city, your city probably has a future. The age of water transport is hardly over – it is just beginning again, and ports will be needed. If your city was a mill city with lots of hydropower – that’s another good sign. Or a major rail hub – we know that rail is much more efficient than private cars. On the other hand, if not very many people lived there until air conditioning or until we stole water from somewhere else, that might not be so good.

2. What are the best projections for its future in climate change? The exception to the rule that you should use the past to predict the future is climate change. If your city is expected to be underwater and subject to increasingly violent storm surges, you might not want to stay – even if you imagine you won’t be alive for the worst consequences, you might consider asking yourself “When I’m 70, will I want to evacuate every hurricane season?” Or if increasing heatwaves and drought are the projection, you should honestly ask whether you are prepared to deal with them. Cities with no good reliable supply of water will probably do very badly indeed.

Todd Stern, the chief American climate change negotiator, said Thursday that the flawed and incomplete agreement reached last month in Copenhagen could provide significant benefits if countries followed through on its provisions.

The only way to manipulate commodity prices is through the ability to secure supply. In the oil markets, funds, whether ETFs or hedge funds, are categorically unable to make or take delivery of the underlying commodity, and are therefore unable to manipulate the price. It is only "end user" producers and distributors, or the few traders with the capability to make and take delivery, who are in a position to manipulate oil prices, and in order to do so they require funding, or leverage.

I believe that it is macro manipulation by oil producers, funded by cheap money from investors, which has been the principal reason for recent movements in the oil price. The advantage producers have over oil traders is that producers are able to store their oil in the ground for free.

LONDON (Reuters) - Global oil demand this year will reach the highest level since 2007, with rising consumption led by faster growth in emerging economies in Asia, the International Energy Agency said on Friday.

The Paris-based adviser to 28 industrialised economies trimmed by 20,000 barrels per day (bpd) its expectations for the rise in global oil demand this year. It now sees demand increasing by 1.4 million barrels per day in 2010.

Outright demand will be 86.3 million bpd, still lower than the 86.5 million bpd used in 2007, but 10,000 bpd higher than previously forecast. Consumption has fallen for the last two years.

(Bloomberg) -- The International Energy Agency cut its forecast for oil supplies from outside the Organization of Oil Exporting Countries this year because of lower-than-expected production in Azerbaijan.

Non-OPEC producers, accounting for about 60 percent of the global total, will provide 51.5 million barrels a day in 2010, or 150,000 barrels a day less than previously estimated, the Paris-based adviser to 28 nations said in its monthly report today. Supplies from outside OPEC will climb by 200,000 barrels a day next near compared with 2009. Production from Azerbaijan’s Azeri-Chirag-Guneshli field was cut by a gas leak in 2008.

“Azerbaijan is the entire story in terms of non-OPEC changes,” David Fyfe, head of the IEA’s oil industry and markets unit, said by phone. “We still see Azeri production rising this year, but not as sharply as before as facilities damaged in 2008 may not get back to capacity before the incident.”

(Bloomberg) -- OPEC’s compliance with record supply cuts announced last year slipped to 58 percent in December, down from 60 percent the previous month, according to the International Energy Agency.

The 11 members of the Organization of Petroleum Exporting Countries bound by production quotas raised output by 95,000 barrels a day to 26.6 million a day last month, the Paris-based IEA said in a monthly report today. That means OPEC exceeded its collective target by 1.8 million barrels a day.

OPEC, responsible for about 40 percent of global crude supply, announced an unprecedented series of production cuts in late 2008 amounting to 4.2 million barrels a day in response to collapsing global demand. Its commitment to that target faltered last year as prices rebounded by 78 percent.

STAVANGER, Norway, Jan 15 (Reuters) - Norway's combined oil and gas production fell by about one percent in 2009 compared to the previous year and is expected to slip further this year mainly as a result of dropping oil output from maturing fields.

(Bloomberg) -- Germany, Poland and three other European countries that receive Russian oil supplies via the Druzhba pipeline across Belarus can weather a potential disruption, the International Energy Agency said.

“Although there is no imminent threat of tighter European crude supplies, given what is as stake for Belarus, a resolution may take some time to achieve,” the IEA said in a report today.

Readers of this blog and subscribers to my newsletter know my view: the peak year for Non-OPEC was 2004 at a sustained annual average of 42.068 mbpd. While it’s always possible that we could hit that level on a monthly basis (and we did so in October of 2008–at least until the revisions start!), it’s highly unlikely Non-OPEC would be able to sustain that number for an entire year. The declines from existing fields are too strong now, and the new finds are too onerous, expensive, and slow to change the well-established trend. However, it’s always amusing to hear what the two energy agencies think–officially speaking, that is.

(Bloomberg) -- Crude oil fell for a fifth day, its longest losing streak in a month, as the dollar gained against the euro, curbing demand for commodities as a currency hedge.

Oil is heading for its first weekly decline in five weeks after a U.S. government report showed supplies of crude and fuels increased, leaving the nation’s stockpiles of distillates like heating oil 18 percent higher than normal. The International Energy Agency kept its forecast for 2010 global oil demand unchanged at 86.3 million barrels a day in a monthly report today.

“If the economy is improving there is an expectation oil stocks will start to fall, but it’s not happening,” said Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg. “The dollar is an extra point for today.”

Matthew Simmons, in order to produce his report on Saudi Arabia’s oil levels, contacted ex-well head managers, studied accounts and most importantly studied the thousands of reports submitted by Saudi Arabia up to 1982 and a few other important documents since.

He believes that Saudi Arabia is well past its peak oil point and has been producing oil from ever depleting fields for years.

He believes that very soon, the amount of water being pumped into these wells will take its toll in a sudden and dramatic way.

No amount of shale oil or drilling of new wells will account for anywhere near the amount that is produced from Saudi’s wells.

Norway is doing everything possible to identify the causes of outages at a number of natural gas facilities earlier this year, Energy Minister Terje Riis-Johansen said today, adding the disruptions in flows to Europe would not be repeated.

Tropical storm-like conditions in the Gulf of Mexico could disrupt offshore oil & gas production over the weekend, according to the weather forecasting service AccuWeather.com.

Meteorologist Joe Bastardi said 'an El Nino based rogue storm' in the GoM will produce gales of up to 50mph and 10-15ft waves Friday and Saturday. The storm is expected to show up in the western and central Gulf about 1.00 pm Friday and move through the eastern portion of the Gulf Saturday.

Demand is back and we are going to be in trouble, hey la de da demand is back. All right based on the Department of Energy it is clear that demand is far from being back in the US but just you wait according to Goldman Sachs as they say that demand is going to be back to pre-recession levels by the third quarter of this year. What?? That is right. Peak demand fears may give way back to peak oil fears as Goldman says that strong demand from emerging markets will increasingly offset the lagging recovery in OECD demand. Are they right?

Alberta's new Energy Minister says his government needs to examine ways to moderate the pace of oil sands development, signalling a shift away from policies that favour unconstrained oil patch growth.

For years, the province has resisted calls to slow the frenzy of activity around Fort McMurray. But Ron Liepert, who was named to the energy portfolio in a provincial cabinet shuffle Wednesday, says he wants to make sure future oil sands development does not again overstretch the capacity of the province's infrastructure.

ASTANA (Reuters) - Kazakhstan hopes to resolve a dispute with a group of foreign companies led by BG and Eni over the huge Karachaganak gas field this year, Energy Minister Sauat Mynbayev said on Friday.

The Commodity Futures Trading Commission on Thursday proposed new rules that would limit big traders' speculative positions in energy futures.

Congress took a hard look at excessive speculation after energy and food prices surged in 2008, prompting CFTC to increase oversight of the markets. Here are some comments from political figures on the CFTC's proposal.

(Bloomberg) -- E.ON AG, Germany’s largest natural- gas supplier, may lose control of the country’s 36.5 billion- euro ($53 billion) market as clients buy cheaper fuel elsewhere and the utility is forced to open its pipelines to competitors.

NEW YORK (CNNMoney.com) -- General Motors has suspended production of Hummer vehicles pending Chinese government approval of its deal to sell the unit to Sichuan Tengzhong Heavy Industrial Machinery Co., a GM spokesman said Thursday.

SAN'A, Yemen – A group of prominent Muslim clerics warned Thursday they will call for jihad, or holy war, if the U.S. sends troops to fight al-Qaida in Yemen.

The group of 15 clergymen includes the highly influential Sheik Abdul-Majid al-Zindani, whom the U.S. has branded a spiritual mentor of Osama bin-Laden but who is also courted by the Yemeni government for his important backing.

What will it take for the military to be greener? If $400 a gallon fuel, incalculable logistics burdens and losses of human life don’t light a fire under the leaders of the Defense Department, it’s hard to imagine what will.

The current wars have exposed a previously ignored military vulnerability: the huge dependence on fossil fuels. The daily requirement for Afghanistan is 300,000 gallons a day. Most of it comes through a tenuous supply line through Pakistan where fuel theft is on the rise and roadside bombs target convoys.

At the Pentagon, officials are fully aware of the situation but are not sure what to do about it.

Military vehicles that use advanced vehicle energy technology cut their own exorbitant fuel costs, and could help make the product more accessible to private commercial buyers, according to industry leaders in a panel discussion today at the North American International Auto Show at Cobo Center in Detroit.

Up to 50 electric vehicles will be tested in Quebec as part of a bid to bring all-electric vehicles to the province, Hydro-Québec and Mitsubishi Motors say.

The trial, described as the largest electric-car pilot project in the country, will take place in the Montreal suburb of Boucherville. City staff will test the Japanese automaker's i-MiEV, a compact four-door hatchback. Hydro-Québec will provide the infrastructure and collect information on how the cars perform.

(Bloomberg) -- Solarworld AG and Q-Cells SE led declines among Germany’s solar power companies after Reuters reported that the government will reduce aid to the industry by more than some analysts estimated.

WASHINGTON -- Sen. Harry Reid said Thursday the Senate will debate a sweeping climate change bill this spring, and he will use it as a vehicle to seek more federal research dollars and more generous tax credits for geothermal development.

But in comments at a geothermal industry conference in New York, the Senate majority leader from Nevada added the bill likely will need bipartisan support, and if it fails to get that, "we'll have to drop back."

(Bloomberg) -- German regulators will recommend today how to manage 126,000 barrels of nuclear waste stored at a crumbling repository in central Germany, a Federal Office for Radiation Protection spokeswoman said.

The atomic regulator has been weighing options for the facility including repackaging the waste and storing it at another repository, creating safer chambers to store the material or filling the entire mine with concrete.

Okay, I might be exaggerating about the composting toilet (but not much). Sharon [Astyk] says she is not a survivalist, and most of her commentariat claims not to be as well - they say they are something much more positive. But some of the stuff that runs through the comment threads leans toward survivalism, albeit with a heavy naïve streak. The "real" survivalists are building compounds and laying in ammo to ward off the hungry mobs and looters; these cherubic souls think they will go on placidly gardening in an undisturbed fashion while the hungry ravening mobs swirl around them. If even half of what they are predicting on the blog and in their comments comes true (and I don't doubt it will, mind you) I just don't see how that's going to be possible.

Where will Kauai be in 2020? What are the problems we, as an island, face and what are some of the best ways to address these challenges today to create a better future for our children tomorrow?

Arguably the previous decade, with its numerous dramas and shocks of terrorism, climate change, peak oil, global pandemics, natural disasters, soaring costs, and economic collapse have driven home the point that the 63,000 of us and the million plus tourists we host each year are not insulated from forces beyond these shores.

BEIJING (Reuters) - China, the world's largest grain producer and top consumer of fertilizers, should reduce its reliance on chemical fertilizers by as much as 50 percent because excessive use has resulted in serious pollution, according to a research report.

"Not many people are aware that agriculture is the largest polluter in China, which should be a subject for serious concern," said Wen Tiejun, head of the School of Agricultural Economics and Rural Development, Renmin University of China.

Chemical fertilizers had helped China, the world's most populous country, to feed its population despite limited farmland, but excessive application had led to low farmland efficiency and serious pollution, according to a research report issued by the school and Greenpeace on Thursday.

The towns' 5 tractors were immobilized from lack of fuel. The train to Pyongyang ran about every 2-3 weeks, at less than 5 kph. Travel permits (bribes required) are a necessity - the regime doesn't want its showplace (Pyongyang) overrun by the poor and disabled. The 'affluent' have bicycles.

Farmers were required to meet weight quotas, and often did so by adding rocks.

(Bloomberg) -- Entergy Corp., the New Orleans-based nuclear power plant operator, sued the U.S. government seeking restitution for alleged negligence by the Army Corps of Engineers in designing levees demolished by Hurricane Katrina.

Entergy and a U.S. unit of German insurer MunichRe are seeking monetary damages, including recovery of $69.5 million in claims paid for losses in the August 2005 storm, according to a complaint filed Jan. 12 in federal court in New Orleans.

(Bloomberg) -- A U.S. law to curb carbon emissions would spur billions of dollars of spending on green-energy projects in developing countries, billionaire George Soros said.

“If you had the legislation in the United States you would have a market” for carbon emissions and for offsetting credits provided to clean-energy projects in the developing world, Soros said at a conference yesterday in New York. “Right now you don’t even have that. The United States is the laggard.”

The Copenhagen summit aimed at limiting greenhouse gases ended with a whimper. Climate legislation in Congress is stumbling. But curbs on U.S. emissions from power plants and factories are coming anyway.

The Environmental Protection Agency is poised to take an historic step at the end of March, issuing the first-ever national rules to fight climate change. That puts companies on edge. "With the economy still limping, it's not the right time for this massive increase in the cost of everything we do," says Michael G. Morris, CEO of American Electric Power (AEP) (AEP).

The cap-and-trade bill may have stalled in Congress, but its opponents aren't taking it easy. They’ve launched a new assault on the Environmental Protection Agency (EPA)—hoping to neutralize the only legal weapon the Obama administration has to curb carbon emissions if the climate legislation fails.

The crux of Lord Monckton's complaint is that the world's climate is nowhere near as sensitive to greenhouse gases as climate scientists believe. The thousands of researchers who have worked on the problem since the 1890s have all been getting their maths wrong, he believes.

It is a bold thesis because climate sensitivity is the keystone to our understanding of global warming.

Big, bad carbon dioxide gets most of the attention when it comes to greenhouse gases, but it's not the only one that's warming the earth. Methane — a gas that is found in everything from landfills to cow stomachs — also plays a big role. Although global methane-emissions levels are much lower than CO2 emissions, pound for pound methane is a more powerful greenhouse gas; a ton of it has 23 times the warming effect of a ton of CO2. And methane, like CO2, is on the rise thanks to us: about 60% of global methane emissions come from man-made sources, and the atmospheric concentration of methane has increased by around 150% since 1750, according to the Intergovernmental Panel on Climate Change. Now there's new focus on a pair of methane sources that we usually don't think of as natural polluters: wetlands and rice paddies.

As governments, businesses, and homeowners plan for the future, they should assume that the world’s oceans will rise by at least two meters — roughly seven feet — this century. But far too few agencies or individuals are preparing for the inevitable increase in sea level that will take place as polar ice sheets melt.

Get the Corps off the shore. The U.S. Army Corps of Engineers, more or less by default, is the government agency in charge of much of the planning and the funding for the nation’s response to sea level rise. It is an agency ill-suited to the job. Part of the problem is that the engineers’ “we can fix it” mentality is the wrong mindset for a sensible approach to responding to changing sea level.

Bingo! The prevailing attitude "If it runs, dam it" mentality of the engineer boys and girls is not what is needed in this situation.

Pre-earthquake energy assessment of Haiti linked below. News reports have described damage to the ports where the import capacity of oil products (no refining in the country) was already limited. The main conclusion of this report on first read is that deforestation could be reversed by importing more LPG and kerosene. Wow, that is some strategy since LPG supply in the USA has been declining for a number of years.

The people of ancient Rome had better access water and sanitation. How is it, that after decades of western "aid", this situation exists? Having made them completely dependent upon food imports, it is now proposed to make them dependent upon fossil fuels? How will the poorest country in the west afford more propane?

The report makes interesting reading, as to how bad things are, and have been for some decades.

It contains such gems as "Hesitation of the alcohol industry owners to use bagasse as an energy source, under the pretext of its
low calorific content. " Even though the sugar cane industry in Brazil (and the rest of the world) is energy self sufficient using this same waste.
Instead of using this for domestic fuel, they slash and burn their trees instead. Most people use plain old earth/pottery stoves for cooking. So what have all the aid efforts been directed at, if not correcting these fundamental problems?

Whatever else people may say about Cuba, and how bad Castro is/was, his people have done better in isolation from the US than the Haitians have done under "aid" from the the West. Almost makes you wonder if the purpose of aid is to keep the country perpetually weak, and dependent. Though I fail to see why that is good for either them or us.

That is one of the reasons why some of us think the world is not going to come out of things on a cheery note. To many people that hold the purse strings are to greedy to let go of some of that money to help their fellow man.

Aid has been coming in to the country but someone is moving it into their own private bank account and letting the people suffer hardships.

There are people out there, that rail on and on about bankers trying to take over the world, and it is happening right here in our own backyard and no one seems to be doing anything about it, or for that matter caring to much about it. Just think what would have happened, if there had not been an Earthquake. These people would still be suffering without outsiders knowing or caring about them.

Maybe now something will be done with all this attention in the area... I wouldn't hold my breath if I were you, but maybe.

Almost makes you wonder if the purpose of aid is to keep the country perpetually weak, and dependent.

Well, yeah, that's been the MO since the slave revolt against the French. The US, France, and Germany have been systematically punishing the only successful negro slave uprising for about 200 years. Just think about how horrifying that was and is for empiric countries such as those, to actually have what were considered subhumans to actually successfully revolt against TPTB. It could never be allowed to happen again, anywhere. The efforts have been overt and covert, and more recently disguised as 'aid' but the results are the same.

Though I fail to see why that is good for either them or us.

No reason needed, really, revenge is good enough. Even Pat Robertson has been briefed enough times on the Haiti problem to know why we're supposed to hate them as devil worshippers and animals.

It isn't just Haiti though. The U.S. supported banana republics all throughout South and Central America. What we did in Haiti was just an extension of that - I don't think they got any 'special' treatment..

Lord Monckton is one of the most vocal residents of the denialist camp. The article points out the fact that his analysis has been debunked, yet, he still is selling his claims to a willing audience. His stance is similar to that of Richard Lindzen, who claims that there is a strong negative feedback in the form of clouds. Both Monckton and Lindzen don't bother to deal with the fact that a consequence of their theories would be that Ice Ages would be a near impossibility. However, it's widely accepted that Ice Ages have appeared repeatedly over periods of thousands of years, so how can these theories be correct?

The denialist response is to simply ignore the criticisms, repeating their stories more frequently, raising the volume level whenever questioned. I guess that's good politics, but it's lousy science.

This has little to do with science, and everything to do with clinging to current economic models and ideologies.
If the denialist camp embraced science, they would be in a fetal position on the floor sobbing and screaming as their word faded into oblivion.

Just in case anyone here IS wondering why he is wrong in stating that AGW theory can't produce an ice age here is a brief explanation of the currently accepted theory:

The ice ages looked to have come and gone in quasi-periodic steps casued by orbital forcing of the climate AKA milankovich cycles. However the next optimal obital condition for an ice age isn't due for a few thousand years so the modelling over the next few 100 years doesn't need to factor in the -ve feedabacks.....YET. ie things could get a lot hotter before we dive into the next ice age in a few 1000 years.......

As CCPO pointed out a while back, we may ironically need to geoengineer the temp up when the next ice age is imminent but thats a few millenia away!

The particular parallel between lung cancer denial and Climate Change denial is apt and worth pointing out. The same tactics and some of the same personalities in both.

And anyone that can question truthfully (in their own minds) the link between cigarette smoking and lung cancer has such poor judgment that their questioning of the link between CO2 and Climate Change can be safely ignored.

I was watching youtube last night and while looking at the EarthShip project people starting seeing things we could be doing better.

Build every new home in america off the grid, using recycled products which will store the carbon they have in them (tires and plastic bottles, even hay bales). You could set up WiFi networks to cut down on the need for cables. There would be better food growth going on as well.

But it'll take some doing, changing people's habits from the McMansions they like to the Earth shelter Sustainable living concept.

Maybe if we can fund building these in Haiti, and other nations where things are rough, things would get easier in the USA.

I try to stay positive, I get to bogged down with all the doom and gloom going on, and I just stop looking at the headlines, and go back to writing fiction, and reading it.

Best hopes for a sustainable future for those that are around in 200 years.

Maybe if we can fund building these in Haiti, and other nations where things are rough, things would get easier in the USA.

How about earthquake proof bamboo tensegrity structures such as geodesic domes? BTW, they could even replant their scorched earth with bamboo forests to produce the building material.

Trying to convince people to change the way they do things even when it is obvious that what they have been doing hasn't worked is still a daunting challenge. I'm willing to bet that most of the houses and buildings will be rebuilt exactly like they were before.

This could be such a great opportunity to really change things in Haiti but I doubt it will happen.

True FM. But then again some Haitian might suggest we learn how to build levees to protect hurricane prone cities. They also might suggest they start replacing all those public schools in San Francisco with bamboo domes. Last I heard none of their schools met current earth quake standards. After all it just a matter of time before SF gets hit with another Big One.

It's not one of my ambitions to live along a major strike-slip fault zone. Of course, perhaps the biggest known earthquake to hit the US was the New Madrid earthquake, in the mid-continent. Interesting article on the origin of the New Madrid Fault Zone:

The New Madrid Seismic Zone is an indistinctly circumscribed region in the central United States distinguished from adjacent parts by its geologic instability manifested by earthquakes. This curious zone is also called the New Madrid Fault Zone, the New Madrid Fault Line, the New Madrid Rift Zone, the New Madrid Rift Complex, the Reelfoot Rift, and the Reelfoot Complex, among other appellations. The New Madrid Seismic Zone is an intraplate seismic zone--smack dab in the center of the North American Plate—as opposed to the more familiar interplate seismic zones, such as California’s San Andreas Fault Zone, which mark transform boundaries between tectonic plates.

The New Madrid seismic zone in Missouri has long intrigued scientists because, according to conventional geologic theory, large earthquakes clustered in a tectonically quiet region are difficult to understand. But at least one AAPG member is challenging the crowd. New Orleans independent geologist Jack M. Reed believes the origin of the earthquakes lies beneath the Gulf of Mexico. . .

The earthquakes in the New Madrid seismic zone and other locations along the theorized rift zone that cuts across the United States as well as the Middleton Place-Summerville seismic zone in South Carolina are tied to the tectonic movement in the Gulf of Mexico Basin, he said.

So, the obvious question for Reed is, what's the exploration potential of this rift zone that cuts through North America? "Not much," Reed conceded. "However, if you want waterfront property you should buy land around Indianapolis. In a couple of million years this acreage could be overlooking the Strait of America that separates western (and) eastern America!"

It would be "interesting" if we had near simultaneous major earthquakes in Southern California along the San Andreas fault and in the mid-continent along the New Madrid zone. I read an article a few years ago about TV networks archiving stock footage of Southern California, so they would have pictures before & after the "Big One." Someone in the article predicted that a catastrophic earthquake in Southern California would be the worst disaster to hit the US since the Civil War.

The Green River Parkway cuts thru a fault in the Rough Creek Graben at mile marker 51 south of Owensboro. Its pretty impressive, kind of looks like a crack opened up in the ground and one side of the crack fell about 20 feet. The fault is perpendicular to the highway.

And IIRC Charlestown SC was all but destroyed by an earthqauke a couple of centuries back. Sometime around 1700 there was supposed to have been a really big one along the St Laurence seaway. Interplate (far from plate boundary) earthquakes do happen, and they are not always small. But their frequency is a lot lower. One problem with the interplate quakes, on highly active faults, the frequent movement generally weakens the fault (which is a good thing as it isn't able to store up high levels of stress). The breaking strength of virgin rock is much higher so it is possible to store up a lot of stress. Worse, not knowing about the hazard building standards are lower.

I read an article about the risk of eastern US quakes, that pointed out exactly what you mentioned: building standards are lower, so the damage is likely to be devastating.

Also, the bedrock is much more solid in the eastern half of the country. That means earthquakes don't happen often, but when they do, they travel much farther. The New Madrid quake, centered near St. Louis, was felt as far away as Toronto and Boston.

The article predicted that steel-reinforced structures, such as skyscrapers and suspension bridges, would survive a New Madrid type quake, but unsupported masonry, like brownstones, would be reduced to rubble.

I discuss earthquakes and disaster preparation in the UnCrash Course because I have no doubt that we will abandon many places in the future after major disasters. Rebuilding takes energy and capital, both of which will be difficult to obtain soon. (And commitment, which is already waning in the case of New Orleans.)

Arkansas is in the blast zone. There has been mentions in the local papers in the past about if we had a quake how many buildings would be toast. Little Rock and North Little Rock sits mostly one shaky ground, especially the downtown regions, Old river beds and underground waterways make for sinking buildings in a quake.

It did not help much that we had over 83 inches of rainfall last year, setting an all time record. We are living in interesting times indeed.

Rockman, I don't think your statement about schools in San Francisco is accurate. Many schools here have had seismic upgrades in the last thirty years. In addition, any building built since 1972 has had to follow strict seismic codes that should enable it to withstand a good shake. Further, all areas of San Francisco are not at equal risk: the parts of the city built on fill are most prone to liquification and damage that devasted the Marina district during Loma Prieta.

This is not to say all public schools in San Francisco will withstand a major earthquake, but generally schools are not considered the buildings most at risk. Of more concern is the plethora of "soft story" buildings--buildings two or more stories tall with a garage opening (or a shop/restaurant with lots of windows) at ground level creating inherent structural weakness. These are the types of buildings that collapsed in the Marina during Loma Prieta. Most of these are in private hands, and the city has only been able to get them upgraded if the building owner wants to remodel or do some other structural change.

The upside of Loma Prieta is that afterwards the entire Marina district (much of it smoking rubble) pretty much got rebuilt with great seismic integrity when the city was flush with dot.com money. (At least there was one positive result of the dot.com boom.) During the same period, many public buildings (Opera House, City Hall, museums, etc.) also received substantial (and expensive) seismic upgrades. Sadly, all our dithering about the Bay Bridge means it is still under construction and the dot.com money is long gone. Of course, if San Francisco gets a 8.0 or greater quake directly underneath the city center, everything is going to come down and there is little anyone can do about it except build the entire city out of bamboo.

"Rockman, I don't think your statement about schools in San Francisco is accurate. Many schools here have had seismic upgrades in the last thirty years." Posted by taomom

Coming from a California based view, for pretty much all the past century, after a major earthquake, seismic standards were upgraded and improved upon. It seems that after the first two or three iterations of this, a fair amount of improvement in safety was actually accomplished. But I suspect that at some point we passed a point of diminishing returns, and continuing actual improvement will shrink as the costs of implementing it arise.

Ever since the end of World War II, construction of large public infrastructure has been done with a mindset of the facility itself having a functional life span of around 35-40 years. It was felt that major rehabs and modernizations would then happen. This also served to create an ongoing supply of Pork for the elected politicians to hand out to various of their campaign contributors. It was also furthered by the mantra of "Progress"; everyone wants the school or hospital to be "modern" and "state of the Art" and "hi-tech", etc.

All this has worked as well as it has only because it happened during what was the (compared to any other historical time span) halcyon era of economic growth that the USA and the West in general have enjoyed since 1945.

But now that the growth is going away, to be replaced by contraction, the above arrangements simply won't work anymore. It will be impossible to do major upgrades every few decades. Facilities will have to be constructed with the Roman or medieval ideal of lasting, if not forever, for as close to it as possible. We will have to accept that various building, seismic standards and such have evolved to where they are as good as they will get; there is, after all no perfect, "fail-safe" seismic code that can guarantee that nobody will ever be hurt in the event of a quake. A new set of deadlines is approaching for a lot of California hospitals to have upgrades completed within a few years. There are hundreds of buildings involved, and one can see at a glance that it is highly unlikely that most of this work will ever be completed. I suppose they might just push off the deadline; I don't expect the political class to come out and admit that what they legislated is not feasible and will in fact, never happen. Actually, I fear that they would prefer to close facilities rather than face the problem directly.

And we have a lot of infrastructure that was built with the post WWII mindset in the past 35 years, that is nearing the end of its life. I doubt that the resources, either physical or financial, will be present in sufficient quantity to deal with all this. It will be interesting to watch the politicians squirm.

I suspect that many buildings will be rebuilt in a piecemeal fashion as money/resources permit. If the roof is a priority it is not uncommon to put up a roof first and then fill in the walls later. Forget about sturdy foundations, unless you can put them in afterwards, because people's priority will be protection of their meager belongings from thieves, or the sun/rain.

I do not doubt that in the poorer neighborhoods the debris will be sorted through and re-incorporated into the recovered structures. You could call it community based recycling.

Unfortunately, there is indeed quite a bit of attention given to "changing things" in Haiti, but it mostly comes from the Heritage Foundation, a right-wing think tank. On her website, Naomi Klein has the following quote, which was on the Heritage Foundation site for just a few hours before it was removed:

"In addition to providing immediate humanitarian assistance, the U.S. response to the tragic earthquake in Haiti earthquake offers opportunities to re-shape Haiti’s long-dysfunctional government and economy as well as to improve the public image of the United States in the region."

Even though I have been spending a lot of time reading about the earthquake, I did not know that Obama tapped George W. Bush to coordinate relief efforts in Haiti (a recommendation from the Heritage Institute). The following interview helped my understanding of the situation (especially 28:30 minutes in, until the end):

Recently on DB, there was a discussion of Naomi Klein's idea that once a disaster happens, the powers ready with a plan to take things in a direction that benefits them will shape the future of the disaster region. In Haiti, at this time, the US has moved in with an effort spearheaded by Clinton, who was instrumental in supporting an economic policy for Haiti that resulted in widespread famine and eating mud cookies, and Bush, who simply directed the abduction of democratically elected President Aristide in 2004.

What came up for me is: "What alternative do I have in mind? How do a support the self-sufficient lifestyle I understand to be preferable?" Certainly sending my money through the Clinton-sponsored channels wasn't going to feel good. My solution was to go back to our countless Oil Drum discussions about how we will be self-sufficient in our low-energy disaster future to come.

So I gave to Heifer International's Haiti relief fund (http://www.heifer.org/site/c.edJRKQNiFiG/b.5720609/?msorce=EEA1C0000B3&m...). I figure that raising chickens and rabbits could be a viable alternative to sweat shops, and provide food to lessen Haiti's dependence on US food aid, and US "food" imports (the very ones that are cheaper than anything that can be obtained locally, and yet, too expensive for the crowds waiting for underpaid work in the city). I am very concerned about saving lives in Port-au-Prince, but I see the real battle for Haiti as occurring once all is said and done, when there needs to be an alternative to the USAID model of "development".

So let's start our TOD model, follow our own advice, and help Haitians become less vulnerable to ongoing "aid". Please copy and pass this along to your circles of friends and acquaintances if you think it will help.

that there is an almost irresistible incentive to find "opportunities" embedded within this disaster.

Well, it depends on what is meant be "opportunities". Clearly there are opportunities for exploiters, but there are also opportunities to rebuild correctly/sustainably. I hope we are able to have the wisdom to concentrate on the second kind.

You are right to think that most of the structures will be built just like they were before. Changing building habits is hardest to do when First world nations are in charge of building codes or the money to do the building.

Being trained in Architecture you learn that building methods that go against the general flow of BAU are hardest to get repeated. Earth Shelters have been around a long time, and passive Solar just as long, but getting these into mainstream thinking and practice has been a tough haul. JHK on his website has the Eyesore of the Month, and I just ache seeing some of the buildings that have been designed in this era of cheap energy.

There are people and groups doing better building designs, but they are not nearly enough to change the overall structure of the world.

We'll have to have more damage to BAU before things change is my guess. Maybe when you have to build almost everything by hand without power tools or FF imputs things will be different, but I am not holding my breath.

You are probably familiar with Architect Simon Velez's work. Also the book that showcases his work "Grow Your Own House"

I can't imagine a better fit for bamboo construction than Haiti now!

.

A bamboo structure will sway and not collapse in an earthquake. Bamboo has a tensile strength approaching that of steel. Plus it is a fast growing grass that would do well in Haiti's climate.
Cultivating bamboo sequesters carbon and is great for restoring depleted soil such as exists in Haiti.

I have always liked Bamboo, someone on here grows it up in the new england states for the shoots which can be a good food crop.

It can be an invasive plant grown in the wrong places.

Before I went to college, I was drowing earth shelter homes and planning on which one I'd live in. I never got there, or at least not yet.

Like I mentioned, somewhere in today's DB there are people doing good design work that is sustainable and lasting, but the BAU crowd is dragging their feet, and slowing the process down. Enough so that I think we'll see it after TPTB dieoff and leave the rest of us that can handle things better a chance to do something.

Pile all the great idea people in the raft so that we can go off somewhere and form our own country.

It gets frustrating at times, seeing the good ideas pushed aside because of someone else's rules.

Charles.

Grow you own home, reminds me of a short story I wrote back in highschool about space travelers landing on a planet with huge trees. (Avatar sized trees, if not bigger) I had gotten my idea out of an old Disney comic book though.

Could someone help me out with something I don't understand? KSA reports that they have the capacity to produce 12.5 mbpd and they are currently producing about 8mbpd. They say that they have invested heavily to meet that level of capacity and are still investing more to increase the cushion. The rationale is "to maintain balanced and acceptable prices to both producers and consumers".

KSA has already said that they think that oil is fairly priced in the $70 to $80 per barrel range, where it has been for a few months now. My question is this: what do the Saudis see coming down the pike that would require such a huge spare capacity to maintain current prices? Or are they just blowing smoke about what their spare capacity really is? Would it make sense for them to make these investments if Iraq, as they have promised, is on the verge of greatly expanding it's production capacity?

I can't believe the Saudis aren't savvy about the world oil situation, yet their investment in expanding an already huge spare capacity just doesn't make sense to me. What am I missing?

I have the theoretical capacity to date Julia Roberts, but as a practical matter, when I dial up her agent and propose a Saturday night movie date, what are the chances that she will say yes?

In any case, I have frequently pointed out that the Saudis promised, in early 2004, to support the $22-$28 OPEC oil price band, and they made good on their promise, as they significantly increased their net oil exports in 2004 & 2005, hitting a recent net export peak rate of 9.1 mbpd in 2005 (Total Liquids, EIA).

But then in early 2006, as oil prices traded more than 100% higher than the $28 upper limit, the Saudis started delivering less oil to the market, a pattern which continued as annual oil prices hit $100 in 2008, and as their annual net oil exports were 8.4 mbpd, well below their 2005 rate.

Based on the logistic models, Saudi Arabia, in 2005, was approximately at the same stage of depletion at which the prior swing producer, Texas, peaked in 1972, and Saudi Arabia's annual oil production has still not exceeded their 2005 rate, but in any case the key number for the oil markets is the volume of net oil exports.

So, take your pick, Saudi Arabia has magical oil fields that don't deplete, or they are having trouble trying to match or exceed their 2005 production rate on a sustained basis, since their older oil fields--accounting for the bulk of their oil production--are in an advanced stage of depletion.

Paulus -- You have to understand the mentality of an exploration geologist: they do live in another universe where reality can be what they might imagine it to be. In such a case doing Julia in another dimension is quit possible.

If readers have noticed that the quality of the "Rock's" comments have improved of late, it's because he has largely defected to the exploration side.

Actually, my lovely bride thought that my Julia Roberts analogy was pretty funny. It had its roots in a debate at Texas A&M in October, 2007. It was yours truly versus Michael Economides.

Economides insisted that Saudi oil production was up in 2006 & 2007 versus 2005, and he produced a chart showing such an increase. I responded with a $1,000 bet that I could produce an EIA data table showing that Saudi production in 2006 and 2007 to date were below the 2005 rate. When I pinned him down on the terms of the bet, he admitted that he was showing estimated Saudi "Productive Capacity." I responded with my Julia Roberts analogy, to which Dr. Economides responded as follows, "I actually dated Julia Roberts."

The other side of the 'swing producer' coin is the currency outcome of said swing production. The Saudis can support a certain trading range until the can't (or won't) or something happens as a result of the currency peg that is consequent to Saudia supporting a particular price.

Of course, the Saudis were lying about the $28 dollars. Why not?

Supporting the $80 price as the upper bound has happened several times in a row over the past six/seven months. It happened last week ... lessee what the stock market is doing: (whistles ... Bloomberg.com)

Dow is down 141 points. This cycle has also repeated itself several times over the past six or seven months. Hard currencies suck. 2010 is the new 1930. Crude oil is the new gold. Ali al- Naimi is the new Montague Norman.

High oil prices are bad because they directly destroy demand and businesses that profit by satisfying that demand. Low prices are also bad because they imply a hard or fixed currency against oil. The high dollar value also amplifies dollar demand which starves businesses that profit by trading goods for dollars.

Heads I win, tails you lose. This is where we are right now, on the cusp of a great dollar shortage. Don't blame me, blame the Saudi oil minister; Fed Chairman Ben Bernanke is standing in the center of the room in his boxers; white with little red hearts on them.

... He's irrelevant.

BTW, of the US economy takes a dump with all the Fed/Treasury/Congress props in place holding it up, who or what will save the economy?

To many people want Nukes. Iran and North Korea being two of them that have been chomping at the bit for the longest. But Pakistan has them, Israel has them, India has them, and they are all in some small way in conflict with each other.

When push comes to shove, Water wars, or Oil wars will break out and someone will just lob a nuke to try and settle things. Or else someone will get to the triggers that don't need access to them.

I try to think rosy thoughts about it, but I know to many things about how badly people act when they are mad.

I think that the Saudis did virtually everything they could to bring down oil prices in 2004 & 2005, and in fact, I think that they did virtually everything they could to bring down oil prices in 2006-2008.

I agree. I suppose there is someone over in Riyadh who would argue for putting all their spare capacity onto the market to drive prices toward the magic $35 level and stimulate some economic growth for real. Now is the time. Carpe Diem!!

That would last for a little while - a few months, perhaps - then demand would catch up and prices would rise again. The cat would be out of the bag with regards to the breadth of KSA's spare capacity and reserves. Right now, Saudia's spare capacity is a 'force in being' alongside Brazil's and Iraq's future capacity; best hinted at but never to be accurately measured.

I think that we can safely assume that he was joking. How can I put this in a delicate manner? Let's just say that in past centuries, when wealth was frequently indicated by girth, I would be considered well off, but Dr. Economides would be considered to be very rich.

WT, I think you're right. Seems like KSA is engaging in public relations -- the only reasonable explanations I can see for the continued investment are (1) they expect a huge bounce in demand or (2) they really don't have the cushion they say they have. I would pick number 2.

I don't think there's any way to know what's really going on there. Especially with the market the way it is now.

However, I would guess that they are expecting demand to increase sharply as the economy recovers, and with China and India ramping up to US-type lifestyles. Heck, Matt Simmons calculates that even if China achieves the lifestyle of Japan in 1960, there may not be enough oil in the world to support it.

Saudi Arabia may be savvy about the world oil situation, but I would bet they do not see the current economic situation as anything but an usually deep recession, which will end, probably sooner rather than later, resulting in a spike in oil demand as the economy booms again.

I would guess they also see the drop in commodities caused by the recession as a great buying opportunity. They had repeated problems trying to expand during the price spike. Everything from shortages of steel and concrete to not enough workers caused delays and cost overruns. Now, they are trying to build what they can while the prices are cheap.

Leanan -- your comment ("even if China achieves the lifestyle of Japan in 1960, there may not be enough oil in the world to support it") got me thinking. PO will(is)certainly a problem for the world collectively. But will it be a problem for China? As long as China has access to the energy it needs PO/PNG isn't going to be a problem for them (other than perhaps having to pay higher prices). There will be more than enough energy in the world for China to continue to expand. As long as they can outbid most others for it.

Consider that the US reached its own PO in the early 70's. Life went on quit well for many. We had the monies to buy what we needed from the exporters and as a result deny such access to many others in the world. Even today US consumers have access to all the oil they can afford to buy. Anyone see a US plant or school shut down for lack of energy (as we just we saw in England)? No lines at the gas stations either. And we're almost 40 years past our peak. Granted the Chinese economy will suffer from PO eventually. But other than a short period back in '08 the US economy has had all the oil it needed and we're way past our own PO. As long as China keeps securing oil in the ground and still has money (much of it coming from our interest payments to them) to buy oil why would we expect them to not have all the oil they need for many decades?

But I do expect a series of wars, like WWI and WWII, to accompany the transition. Whether that transition is to a new fuel source or a new global financial center.

Leanan,
I assume you are talking about non-nuclear war. A world war with the U.S. and its allies against China and much of Asia!? I'm really having a hard time getting my head around that one. What side will India choose? Russia? Methinks that would be a short (conventional) war.

As Krugman pointed out, in the previous age of globalization, it seemed impossible that war would end it...especially a war as large as WWI. And WWI was called "The War To End All Wars" - but of course, it wasn't.

My guess is that the wars of the future will look more like Vietnam or Iraq than like WWII, but I could be as mistaken as those who never imagined the first two world wars.

And I am not entirely ruling out nuclear war. Even odds on whether it involves Israel-Iran or India-Pakistan.

I think the causes are multiple. Clearly oil was very strategically important. A good portion of the credit for the allied victory should go to the sucessful strategy of cutting the axis off from their oil supply. But lebensraum, was mainly about arable land. And ideology/racism was also a very strong driver. I think it is the rare war that has a single cause. Usually there are a collection of causes, some major and some minor. Not all of the political actors make the same calculus, for some some factors are unimportant. But overall, in assembling a coalition for a war, you take some people who come for cause A, and add others who are motivated by plan B.

Good point on Japan and my bad for only thinking of Germany.
As stated above there were many reasons and many players in many theaters and I am guilty of tunnel vision and over generalizing.
I guess what I was thinking is that at the present no one wants to expand their borders but everyone needs natural resources.

This is simply not true. Wars were often fought over who got to loot the resources, and to protect supply lines that funneled the resources back home.

It's been argued that that's the problem with Africa: Westerners didn't really want to live there, they just wanted to extract the resources. So all the infrastructure built is designed to take resources out of the country, and doesn't really benefit those who live there.

See my response above.
You are right and I was thinking very narrowly about Germany's desire to expand their population and borders. Now going back and reading your original comment you did say what I would interpret as.................That future conflicts will look similar to the smaller resource wars and not like the big wars of conquest or expansion.

Meanwhile The North Koreans who under the guise of nuclear saber rattling had really been secretly conducting research into biological warfare, lucked out when South Korean stem cell researcher Hwang Woo Suk, previously discredited for having fabricated stem-cell research results was finally recruited by the North Korean government to run its biological warfare labs. They convinced him by making him an offer he couldn't refuse, they would kill him if he didn't comply.

They have since succeeded in creating a lethal highly contagious pathogen. They also have developed a vaccine that immunizes their own forces against the pathogen.

In late March of 2012, 1000 of their citizens unbeknownst to them, are inoculated with the lethal organism and dispatched to various major cities around the world. Thereby unleashing a pandemic of global proportions. Billions of people are killed and the remainder must pay the price. The North Koreans are thus able to hold the entire planet for ransom and North Korean president Kim Jong-il is declared leader of the world. Muhahahahahaha!

I meant today do we see the shut downs. As far as military conflicts I'm sure the Chinese would accept 30 or 40 million lost in a nuclear attack. Would the US? I'm absolute convinced the Chinese would go nuclear if it came to that or loosing. No doubt what so ever.

I'm not predicting what will happen. I'm just asking for a reason why China couldn't take the same position the US took during the second half of the 20th century. We got away with it didn't we?

The problem with looking back at the US after peaking in 1970 is that back then, there were lots of other potential suppliers around and a lot fewer consumers wanting to use all that oil. Both no longer pertain to the present world situation. And, back in the early 1970's, imported oil was relatively less expensive compared to that produced in the US. The price advantage didn't last very long, however.

So, I think our collective decision (if that really WAS a decision) was to burn SA's oil first. That may have been a good decision, given the fact that there is a faction in SA which would rather cut off our heads than accept our cultural outlook on life. If SA really is peaking out and soon to enter a decline, the net effect on the SA economy can only be bad, given their rapid population growth. Now that the West is "at war" with the radical fringe of Islam, maybe "Burn SA First" will turn out to be a good way to defeat an enemy. Of course, such thinking can work both ways.

After Peak Oil, it's likely that we won't see cheap oil again. If so, the Chinese and the Indians will pay the same as the rest of the world, which won't cushion them from a future of ever rising prices. To think that their store of paper wealth will allow them to ride out the storm is rather like thinking that owning millions of Marks during the Weimar Republic in Germany would insulate one from the storm which followed. We are all "in" the same boat, aka, Spaceship Earth...

That's correct Leanan. And not just what they now own title to but also what they've taken under long term contract (i.e. Vz heavy).

It's only an opinion, of course. But if I had to pick between China and the U.S. as to who could hold on to their reserves better I'd go with China 4 out 5 times. Actually I'll retract that statement because the U.S. doesn't own any over seas oil reources. So we have nothing to defend away from our shores. OTOH we won't have to worry about anyone invading us for our reserves. But I don't think it will come to any of that, at least not initially. My clearest view of the future is China and the U.S. sharing energy resources. And it's good to remind folks that while the U.S. does consume a huge amount of imported oil, we are still the third largest oil producer in the world. That oil will always be ours. This vision assumes, of course, that both are stable enough to do so. And that doesn't mean in absolute terms: even if both economies take a hit what other countries would be in better shape to knock us to a lower position. Is the EU going to bully U.S. forces out of the ME? Is Japan going to make China hide in the corner while they monopolizes Asian resources? As someone said long ago: God didn't make men equal...Smith and Wesson did. It may not be a matter of who is strong and who has the most vibrant economy. Just a matter of who is stronger and can better protect their interests. Between Chinese national interests and U.S Marines I don't think I would bet on anyone else in the world.

"Anyone see a US plant or school shut down for lack of energy (as we just we saw in England)?"

Yes. Almost the entire plastics industry moved offshore because its NatGas feedstock price was getting too high. Same with the makers of fertilizers for the same reason. Many small businesses are now shuttered because of high energy costs; I know several from the Enron-induced California energy extortion timeframe. There've been reports of lines at gas stations mostly in the southern states several times over the past two years. Lots of truckers became jobless when diesel went beyond $4/gal on its way to $5. And I'm sure many family farmers went BK when energy and fertilizer crops erased their slim operating margins. And high energy costs certainly played their own role in causing the current depression.

Kingfish, first off, your link don't work. You should always check them with the "preview" button before posting because people often leave out a quotation mark or get something else wrong. It will still show up as a red link but just wont work. Try this one:

There is just no way of really knowing anything about Saudi's ability to produce more oil because they are so secretive. We can only speculate. As for my speculation I think their old mature fields are declining rapidly and the new production from Khurais will be gone, due to depletion in their older fields, in about two years. If I could prove it I would bet a thousand dollars that they cannot produce 12.5 mb/d.

And by the way, I did Julie Roberts last night... in another dimension.

Thanks for the correction on the link. I agree about the 12.5. Seems like one of these days the curtain will be pulled back and we will all find out what the real story is. Unfortunately, that won't happen until it's very late in the game.

Boy, you Americans are real 'doers'. Although your ambitions seem to be drooping. Some decades ago, when I was still footloose and fancy free, I would often meet American fellow travellers who would enthusiastically tell me how they were 'doing Europe this month, and how they had 'done' India last summer, and so on.

Saudi Arabia announced about 5 years ago plans to increase production capability from 10.0 to 12.5 mbpd by 2010 and then increase that to 15.0 mbpd by 2015. My dates might be off by a year or 2, but that's the gist of it. After 2015 they have said that they will maintain the 15 mbpd level indefinitely. These are long term projects and take billions of dollars and years to complete. Notably a former VP of ARAMCO, Sadad al Husseini, stated that he believed they would achieve the 12.5 mbpd goal but that he doubted they would ever reach 15 mbpd.

To put it in context world oil demand was increasing about 1 mbpd per year before the recession with very little excess capacity. So adding a few mbpd of supply was quite critical.

The least conspiratorial explanation for current production levels is that the recession has dampened demand and that Saudi Arabia has about 4 mbpd of excess capacity. That may seem like a lot, but there are not many countries with excess capacity. As far as I know all non-OPEC countries are essentially producing at full capacity and the other OPEC countries have at best a spotty record for reducing production to meet OPEC mandated quotas.

To put it in context world oil demand was increasing about 1 mbpd per year before the recession with very little excess capacity. So adding a few mbpd of supply was quite critical.

Actually the decline started a year and a half before the recession, and in my opinion it was one of the causes of the recession. World oil (C+C) production increased an average of 915,000 barrels per day, per year, from 1984 thru 2005. C+C production in the last four years has dropped an average of 405,000 barrels per day, per year.

Change in world crude oil production from previous year 1984 thru 2009 in thousand bp/d. (First 10 months of 2009)

Well actually it was not the largest decrease on record, only the largest in the last quarter century. 1980 holds the discinction of being the largest decrease in history. Here are the years I left off in the above post.

The drop in 1975 was due to the Arab oil embargo and the drop beginning in 1980 was due to the Iranian revolution and the Iran-Iraqi war.

I expect 2010 Non-OPEC production to be slightly lower than 2009 and OPEC 2010 production to be slightly higher than 2009. It should be pretty close to a wash in All Liquids with a slight drop in total C+C production. Of course that is just a guess.

(Health.com) -- Obesity rates in the United States are still sky-high, but for the moment they appear to have stopped climbing higher, according to new data released by the Centers for Disease Control and Prevention. ... The obesity rate among women and children hasn't changed measurably over the past decade, however, and it has remained largely flat among men for the past five years, according to the CDC report, which was published in the Journal of the American Medical Association.

My question is how do they get their numbers? Could they have gone down due to the fact that more people from other countries are being surveyed(illegals or not), these people not being generally obese to begin with until after they start eating like the average American?

How many people died in the US in the last decade, that would have been considered Obese at the time of death? Then you roll into the numbers how many people are getting by food wise, on food stamps so they are most likely not eating as healthy and not getting enough to eat either.

I always remember the fun that can be played with surveys and statistics.

Survey says that 1 out of 100 people are going to be millionaires. So I gathered 100 friends and rolled some dice and found the gal who is the next millionaire and borrowed 500,000 from them. Oh never mind, that was an error in the numbers, she said she hated being a banker.

In a fascinating article in JAMA (Journal of the American Medical Association), someone calculated exactly how much you would gain if you ate a set number of extra calories each day.

Basically, it turns out that if you ate X extra calories per day, you would gain, say, Y lbs, but beyond that, given that you expend energy to carry the extra weight around, and to maintain and repair this flesh, you would stop gaining.

That is, unless you further increase the number of calories you are taking in daily.

So it may just be that we have (finally) reached the point where people just simply can't ingest any more calories, on the average.

One strategy to get people to spend more was to offer them a better value for the dollar. For example, 16oz would cost $1, but supersize to 32oz and you pay only $1.25. What moron would spend only $1 given that offer?

Or like what my brother does is order water, or a cup so he can get his own. I don't go out to eat enough to even say I do that, if I am buying at a fast food place, I don't even order a drink, I have one in my pack, or in the van.

3,500 calories to gain or lose one pound of body weight.

So if you eat 3,000 a day and use 2,000 you will gain weight.

I am not a light person, I am the tallest person in 3 generations of both sides of my family though. Since I hurt my back, I've not walked the 3 to 10 miles everyday that I used to walk and I have gained weight.

Thank God I was not addicted to sugary drinks. If I drink soda, several that I do like, I drink diet.

I planned to write about Malcolm Gladwell in this post a couple of days ago, but I had rambled on long enough, so I deferred it until later. Well, Felix Salmon beat me to the punch, which is all for the best anyway, since the connection was going to be John Paulson, and Felix knows much more about hedge funds than I do.

The topic is Gladwell’s still-subscription-only article, “The Sure Thing: How Entrepreneurs Really Succeed,” in which Paulson plays a starring role. The sub-sub-head in the table of contents says, “The myth of the daredevil entrepreneur,” so even though I expected Gladwell to be annoyingly contrarian again, for once I expected to agree with him. The conventional wisdom, in this case, is that successful entrepreneurs get that way by taking big risks.

I’m inclined against the conventional wisdom because I co-founded a company, it’s done pretty well, and I’m about the most risk-averse person I know. (Want proof? I even worked at McKinsey, the world’s epicenter of risk aversion; two of the other founders were also former management consultants.) In my opinion, based on limited experience, to start a successful company you need to have a solid plan, a realistic assessment of your chances, the willingness to take on a modest amount of financial risk (starting a company is rarely the best way to maximize your expected aggregate income, and never the best way after adjusting for risk), and the belief that the non-monetary satisfaction you get along the way will more than compensate for the financial disadvantages.

A large thread among the peak oil community is transition, which (voluntarily or not) create large numbers of entrepreneurs. The transition from BAU to whatever future will require taking unmeasurable risks of all kinds. Programming the future is now divided. The ultra- high technology push- button solution future lies down one fork in the road with the desperate Mad Max stray- dog hunting and beetle gathering future down the other. The required conceptualizing is freaking people (politicians, businessmen, economists, hunter/gatherers) out!

Consider:

Also note that Gladwell’s added sentence is a poor description of (hedge fund manager) John Paulson’s behavior: “But if he was genuinely going to make a trade of the lifetime, he needed more. Like a cocksure Las Vegas card-counter, he was eager to split his winning blackjack hand, again and again.” [Greg Zuckerman, The Greatest Trade Ever, p. 177 in free pre-publication version.] And his short position got to the point where it simply count not be hedged. “Now that the ABX had tumbled from 100 to 60, (ABX is an index of mortgage derivatives. Steve) Paulson had a lot more to lose–the index easily could snap back to 100. If the mortgage investments recovered in price, Paulson would be known as the investor who let the trade of the year slip through his fingers.” His colleague Paolo Pellegrini tried to get Paulson to lock in more of his winnings, but he refused [p. 198]. And how can a real entrepreneur–Page and Brin, Gates and Allen, etc.–possibly hedge his position? When you have years of your life’s work tied up in one project, it can’t be hedged. You only have one life.

This appears to be the same kind of trading risk faced by a cubicle drone considering shifting to off-the-grid, shotgun toting, deer hunting, oxen- following sustainability. The leap of faith itself is extraordinarily risky. It cuts 180 degrees against default 'USA Jetsons Future Narrative' of flying cars and unlimited convenience @ very low prices. It does so as advertising keeps insisting that the flying cars are right around the corner. The sustainability process itself discounts measuring the risks associated with it; the measuring process is part of Jetsons' lexicon. The process - as Gladwell suggests - rewards caution and trend- following rather than risk- taking, eventually, no changes take place because there is no way to manage associated risks. Like Paulson's ABX shorting, there is too much to invest, we each only have one life.

I have managed to completely freak Zuska out, and for that, I can only offer both apologies and sympathy. It really sucketh deeply when people come bang up against the realities of depletion and climate change. And one of the things that so insidious about the painfulness of this encounter is that a lot of times, people who are ordinarily more critical in their responses, go to the worst possible scenarios with a kind of horrified fascination.

This is not totally unreasonable - not only is there tremendous social pressure to go to the apocalyptic (plenty of movies, lots of tv, fiction...) but the destruction of one's expectations about the future can be so devastating it is hard to see any kind of positive outcome. But the problem with this is twofold. First of all, it is hard to do anything but feel irrelevant and lost. And while all of us are entitled to a few nights of margaritas and ben and jerry's as we mourn the fall of our future, that's not a great long term strategy. The second is that I think we tend to go from one end of the spectrum to the other so fast that we miss the possibility that there is some space in the middle to rest upon.

From the Malcolm Gladwell perspective, the best that Oil Drum can do is illuminate risk management approaches and simplify the entrepreneurial rewards process.

As I have spent most of the last 25 years as a cubical drone, this really hits home for me.

I have always tried to balance the cubical existence with outside activities like nature conservation work, because I always knew that the future would be low energy. It was always the flaw in those star trek technologies.

Now my cubical world is disintegrating, we are moving to short time working, or in my case, short short time working as I already cut my hours, and it is obvious the drop is not far away.

I still commute home (on my cycle) each day to my comfy suburban (super-insulated) home and (adopted) family, to feed the chickens and the woodburner, but I know my adaptions to date are little more than greenwash. I can't grow vegetables to save my life, I have no viable plan B.

Find someone that can grow vegies and trade eggs for vegies. Pick up skills in hand tool use be it wood working, or sewing, or something that be traded for vegies. You can also go see your local Master Gardener classes and see if you can pick up the skills needed to grow vegies, it is not as hard as it looks. Given time and training you should be able to pick up enough to grow things even though you don't think you can now.

A long time ago I was afraid of the water, and I forced myself to go deeper and deeper. I didn't like the idea of being pushed into the water, so I changed it so that I could leap in whenever I wanted to. Change is not easy, habits are hard to break, but you can change and you can break habits. The best way is slowly, we don't want to be forced into it, it'll hurt more that way.

Entrepreneurs who make the leap, take the biggest risk in implementing any one of the numerous "right" things to do for the "new paradigm" quickly come up against the economic realities of the current paradigm. Many people harbor a near religious belief that we will soon hit an inflection point where the economics of the old paradigm collapse and this signals the beginning of the new paradigm economics where we can all make good money doing the "right" thing.

First there may not be an inflection point at all, or at least not one that is perceived as such. Second is that there is only a "chance" of shifting to a more conducive economic paradigm, and there is also a good chance of a shift to the more negative.

The point is we need to aggressively address the economics of the collapse situation and aggressively force it in the "right" direction. Think about it. Who makes these decisions now and do we trust them to steer the economy in the direction where all of what we see needs to be done can flourish? If there is an inflection point will they see the error of their ways and say "Ok, we messed up. you can take over from here"?

We need to actively engineer a new SUPERSYSTEM monitary system to organize ourselves under in order to effect and other positive outcomes.

All good points, until that bit about the SUPERSYSTEM monitary system.

I am an entrepreneur, the sort of cautious small business owner who will never make glossy magazine covers because I try to be as boring as possible. What used to be risk was just ignorance and lack of research experience.

Greer put it well when he said that any business model has to work in the here and now or it isn't going to work. It also has to be appropriately scaled. At the small business scale it's possible to try various transitional alternatives and see what works. It's possible to keep revisiting strategies and asking "is this sustainable yet?" If I were dragging along a whole corporate beast, most of the things I try (and yes, a lot of them don't work) would just be counterproductive.

Hamster - It sounds like you are successful...for now, and therefore dismiss alot of the negative potential of a supersystem that is so all pervasive that it may not transition to "sustainable" as you imply. There is a certain bravado that makes it difficult to accept that the monetary might be the underlying driver of a lot of what is wrong in the world, and not just a matter of winners and losers. By the way I am one of the winners in case you want to dismiss what I say as sour grapes.

I agree that the dog eat dog nature of the monetary system is a core problem that if not remedied will continue to plague mankind.
There are so many layers of potential manipulation and obfuscation (when finance is included) in the abstract third element called money in a value for value transaction that it creates more confusion and opaqueness than anything else.
Just the expression "The terms of a transaction are just as or more important than the items being transacted" speaks volumes to the possible tricky and deceit introduced because of money and interest etc.
If money is to be used it should be the property of the people and treated like a utility to facilitate economic activity and fair and efficient trade and not a giant skim mechanism used to enslave and exploit the many by the few worst elements of the human race.
There should be severe penalties for the behavior that is now somehow not only condoned but glorified.
But hey I guess since the same psychopaths that control the money also control the lie box (media) it is just part of the brainwashing.

Control of Money has been a method to control power. Power in the hands of someone that is looking out for the common man is not something you find very often. Very few people who have had power have been able to deal fairly with all those under them. It is not human nature to share and be nice to everyone. We might be able to be armchair power people, saying that we would be fair and kind to everyone we would have control over. But when we got to the top of the heap, and declared ourselves king, would we be able to keep our ideals?

Banking and money lending as we know it today got it's start when the world had lots of kings and courts and serfs and slaves. Just because we say we are free peoples these days does not mean we are free. Most people are still wage slaves of some sort or another.

Actually, I suggest that money is a way of keeping track of debt and not all money scales well. The one size fits all euro is an ongoing disaster for Europe's traditionally poor countries. The dollar only works for 50 states because the states get to set their own minimum wage and other monetary controls that allow some wiggle room between the value of a dollar in NYC and in Arkansas.

Argueably, we already have lots of SUPERSYSTEM money. What we need more of is local money. Local money has historically often coexisted with national money. Hence contracts from prior centuries specifying payment in British sterling or gold florins, while local transactions were in local currency. Or transactions might be valued in shillings but no actual shillings changed hands. The debt was settled with labor or goods.

The really cool thing about local money is that it is a do it yourself project, as opposed to waiting for the Finger from On High to reach down and solve the problem. Money is just a way to track debit and credit. I heard today about a mental health professional, who years ago wasn't making "enough" money because his patients needed his professional help before they could get and keep a job. So he set up an exchange and accepted payment in services and food.

The recent thread here about the Depression labor exchange is an example of how well local money can work for paying local debt.

The way I see it, any "opportunity" that there might be beyond the inflection point, tipping point, paradigm change, or whatever you want to call it, is more likely to be along the lines of an opportunity to avoid losing your shirt.

Yes, we will hear of a handfull of people who took some incredible big risk and made out like bandits. What you are less likely to hear about will be the hundreds of thousands of others who tried to pull the same stunt and ended up flat on their face, broke, and maybe even homeless.

The best "opportunity" one gets in a hurricane is the opportunity to evacuate before it hits.

In an economy in long term decline, there are almost no upside risks, and many downside ones. Avoiding and minimizing risks becomes all-important. Managers who can clearly see potential risks and and are careful to minimize exposures will be highly valued and in high demand.

This is 180 degrees different from how things have been in our economy up to now. Risk taking has been rewarded rather than punished; in the future, the opposite will almost certainly become the norm. Those businesses that thrived and prospered in an environment of high risk will almost certainly be squeezed into extinction within just a few year's time. On the other hand, the types of businesses that have been considered "staid", "plodding", and "boring" are exactly the types that might just survive, and even do well, in a declining economy.

It is a massive paradigm shift, I cannot even begin to emphasize how profound and important it is. Almost nobody really gets it, yet.

Which "boring" businesses do you see as most promising in this new scenario?

Businesses that can help other businesses, organizations, and households to minimize or avoid risks should do well.

Security threats to property and people will be of particular concern, and businesses that can help with that will do well. This includes everything from security guards, nightwatchmen, and bodyguards all the way up in scale, and also includes technologies such as locking hardware, intrusion alarm systems, window bars & grates, etc. Unfortunately, things like "protection rackets" are also quite likely to thrive in such an environment.

Another group that will thrive are accountants, inventory control specialists, etc. Businesses will have to do a better job of keeping track of their money and inventory, both will have a tendency to "grow legs" in this environment.

Those engineering disciplines that are focused particularly on preventing bad things from happening - safety engineers, traffic engineers, structural engineers, etc. - should also do quite well. There will be much less emphasis on building new stuff and much more emphasis on re-designing, modifying, and retrofitting existing things so that they are more likely to last longer and not cause problems or hazards in the future.

Sudden disruptions to supply lines, especially energy, water, food, communications, and other essential service supply lines, is another huge category of downside risk that must be anticipated and avoided or minimized at all levels, from households up to national governments. Anyone who is in the business of securing any of these supply lines from any type of disruption risk should see good demand for their services. Those who make systems or systems components that are relatively more hardened against disruptive forces, or that are more robust and resillient, should be able to command a premium. There will also be a demand for systems that reduce people's dependence upon large-scale supply chains and reduces their vulnerability to disruption; this, rather than mere cost/kWh savings, is likely to be the primary driver for PV system sales. Sales of backup/emergency systems like generators should continue to do well.

In general, people who make and sell basic necessities that are designed and built to last with minimal problems or hazards should do fine.

The build your house for cash over ten years while you live in a shack , drive a new pickup twenty years to the town job, borrow nothing against the home place, borrow only to buy more efficient machinery, keep on growing your own food when it is cheaper to buy it-This is the Scots /Irish/ Baptist heritage of the southern mountians, intermixed with a little too much whiskey and gunpowder for "normal" times.

But we have been lucky for so long that abnormally good safe prosperous times are nowadays mistaken for the norm.

If you want to survive consider acquiring a few southern hillbilly buddies old enough to remember how thier daddies and grand daddies and great grand daddies got thru got the last part of the nineteenth century and the first half of the twentieth.

People with long term roots in Arkansas and Texas will understand whereof I speak.( HL Mencken once remarked not altogether tongue in cheek that among other adventures he had been shot at several times and actually been to Arkansas three times.)

( I can see Buffalo Mountian from a hilltop behind my house.Local lore , fairly well documented, has it that the Buffalo was the meanest place anywhere in the hills during the Prohibition era.The actual most intensive moonshining occurred a few miles to the east and south .)

The murder rate around here in those days was (per capita) high enough to make any modern city seem safe as a Sunday school picnic.But if you didn't actually give somebody reason, you were reasonably safe-it's just that disputes weren't settled in court.

If ts really htf the rules are going to change so drastically about ninety percent of the nice civilized believe-in-dialogue-and-negotiation office dewlling types will die in the first six months of anarchy.

The transition from BAU to whatever future will require taking unmeasurable risks of all kinds.

Steve, that was good. Considering what we are wanting to do, suppose you are the banker and I come in with a business plan. I have 5 investors, and together we have 2.5 Million USD, and need another 5.

I am breaking from BAU, and tell the you that I propose to set up a sustainable company, making eco-wigets, and propose employing local people at liveable wages, with no growth projected. In fact, we plan to reduce in size gradually, as our local population level declines.

In a declining economy, your business plan should be premised on avoiding indebtedness altogether. Debt is going to be every bit as bad as risk - worse, actually, because many downside risks won't come to pass, but debts WILL have to be paid. Don't expect bankruptcy laws to continue being as forgiving as they are now for much longer, either. The easy forgiveness of bankruptcy made sense in a growing economy, where risk taking was encouraged. It makes no sense at all in a declining economy, where you want risk taking to be minimized. No, I figure that within the next decade, the bankruptcy laws will be changed in such a way that if you are responsible for your company to go bankrupt, that will have serious constraining consequences upon what you can do and how much income you can retain and enjoy for the rest of your life. We won't have debtor's prisons, your wages will just be garnished until your die.

Your business plan will need to anticipate 100% equity financing. Commercial banks might very well be in the business of helping you line that up. They will be interested in having you do your banking with them, and this may be one way to get it.

OTOH, you are absolutely correct about avoiding debt like the plague. My business is cash only. All investors are partners, not shareholders, and share in risk and reward. We minimize risk ... and because of this we share decision making as a partnership must. All must agree. Otherwise, either the deed is not done, or the dissenter is paid off.

Contracts for these type endeavors will be dicey, and it will be very important that the owners of new businesses be like minded. This will help in building community - see the many posts, above.

For an interesting read on a possible future, check out Julian Comstock. Prophetic? Perhaps. Scarey? For certain.

"The advantage producers have over oil traders is that producers are able to store their oil in the ground for free."

True, although one must remember that the bills keep coming in even if the oil isn't going out. We have contractual minimum flow requirements on our connector pipelines, someone must drive out to the pumpjack regularly, lube it, and read the meter, and the office staff expect their regular paychecks. Oil prices aren't too bad right now for conventional wells that are long since paid off (I have one well that was drilled in 1953) but we have throttled back our natural gas wells to the bare minimum cash flow needed.

For the big players like the Saudis their on-going expenses would be paid out of petty cash. For us small-timers, it is a different matter.

I'll have to back Dale up on that point. That oil in the ground can sometimes be more like a loan you've taken out than a CD. Those producible reserves represent money you spent. And as Dale says, you keep paying interest (over head, etc) whether you're producing the oil or not. You might keep it in the ground but that would be similar to borrowing money and then putting it into a bank account drawing zero interests. I know it sound counterintuitive but I've seen many operators struggle to raise their production rates when prices drop: cash flow is almost always more important than profit for many operators...big and small.

Is it me, or does the news seem to be increasingly polarized? It used to be that oil was going up, up, up. Now, things seem to be in one of two camps -
1. New fields (Iraq), a peak in US consumption, and alternatives, will keep oil in a reasonable range for several (10?) years to come.
2. The recession is over, and we're off to the races again.
I know those two views have been around for a while, but there seems to be very few who are in the middle ground anymore.

"Two men say they're Jesus. One of 'em must be wrong." 'Industrial Disease' by Dire Straits

I go down to Speakers Corner I'm thunderstruck
They got free speech tourists, police in trucks
Two men say there're Jesus, one of them must be wrong
There's a protest singer singing a protest song - he says
"They wanna have a war so they can keep us on our knees
They wanna have a war so they can keep their factories
They wanna have a war to stop us buying Japanese
They wanna have a war to stop industrial disease

They're pointing out the enemy to keep you deaf and blind
They wanna sap your energy incarcerate your mind
They give you Rule Britannia, gassy beer, page three
Two weeks in España and Sunday striptease"
Meanwhile the first Jesus says "I'd cure it soon
Abolish Monday mornings and Friday afternoons"
The other one's out on hunger strike he's dying by degrees
How come even Jesus gets industrial disease ??

Peak demand really reflects drop of standard of living, as society can no longer afford high-priced oil. The problem is that oil is used to a significant extent for necessities, like food and gasoline. If oil prices try to go up, people are forced to cut back on non-necessities, or default on their loans, (since their incomes don't go up) producing greater recession. Result is more recession, and less use of oil. This is "Demand Destruction", so not viewed by some as a problem--but it really is.

Alternatives may grow some, but from such a low base that they won't make a significant difference. In a recessionary environment, governments will cut back on subsidies, limiting the growth of alternatives.

Iraq may add a little production, but not anywhere near 10 million bpd. With declines in oil production elsewhere, Iraq's gain will be offset by losses elsewhere, in not too long.

The average American household can use 1/2 as much energy (see Here in Halifax for some real world examples). The USA does not need 1000% more retail space/capita that we had in 1950. Many VMT are not needed and cars can become more efficient. Truck freight could move to electrified rail (20 BTUS of diesel for 1 BTU of electricity).

And we could build massive amounts of Urban Rail for a pittance of our consumption, and efficient TOD housing, etc. within walking & bicycling distance of Urban Rail (3 TOD houses should use less material than one McMansion, another form of efficiency).

Light rail replacing the automobile would never work in the U.S., the cities are not laid out in a way conducive to it. Where I live (not a city) there is no way light rail would enable me to get around unless every building was demolished and the entire county was rebuilt from the ground up. Cars can become more efficient, but shaving off .7 million barrels a day of consumption doesn't mean much in the grand scheme of things. How are people going to afford to buy those efficient cars?

I can see rail replacing trucking to some extent, but goods would still need to be offloaded from hubs to surrounding areas via truck.

Since Haiti is in the news, how would light rail enable us to evacuate areas when something such as a hurricane is coming? There is no way a large area such as Miami could evacuate on trains all at once. Rail is nice, but nothing is as convenient as the automobile.

I do not know if you read my earlier response where the US was responsible for much/perhaps most of Haiti's failures. We controlled their finances from 1915 till 1947, FDR wrote their constitution, we helped dump a President lately, etc.

Multiple points.

France is building trams in every town of 100,000 and more. Mulhouse France (pop 110,900) went from no trams in 1995 to 34 miles by 2012. In several places one can see cows and vineyards from the trams. 1,500 km of new tram lines in a decade are expected to cost 20 billion euros. MUCH less than one AIG bailout.

Much of US retail and housing is not built to last. A decade or so ago, the standard for time to major repairs was decreased from 30 to 20 years. So we are going to do a lot of rehab or rebuilding anyway.

Bicycling is viable in Florida and the required infrastructure is cheap.

Relocating warehouses and factories to rail sidings or extending rail sidings (we have some tracks on city streets) can be done at low cost over time (since we do not build to last today).

DC Metro alone saves 100,000 b/day. French like expansion of Urban Rail and the related TOD could save 2+ million b/day. Trucks use 2.1 million b/day (pre-recession) and trains 250,000 b/day. Electrify trains, bicycle, walkable neighborhoods and Urban Rail faster than the French and -6 million b/day is reasonable in 15 to 20 years. With a HIGHER quality of life !

Miami can not evacuate by automobile, but stands a chance with auto + rail + air.

Extend Miami Metro further south (to Dade City ?). North deep into Ft. Lauderdale and further west to safe inland structures (some university is in west Miami with plans for rail).

Depending on strike zone, Miami Metro could transfer at least 30,000 people/hour to MIA (and another 30 K to FLL) with some baggage if planes could be boarded at that rate (baggage for first groups, last hours no baggage). Just 48 hours can move a lot of people.

As many people as could fit inside the university and other public structures inland could also be transferred by Metro.

If streetcars or light rail was built to feed off of Tri-Rail stations, and Tri-Rail was expanded to, say, Jacksonville on one coast and Tallahassee on the other, it could solve much of Florida's evacuation problems.

I guess the flip side are the shortcomings of trying to rely upon cars to evacuate. Tales of 100 mile traffic jams are common in such situations, and people commonly run out of fuel and are then stranded by the side of the road out in the middle of nowhere..

That's not to say that there isn't a place for trying to evacuate by car, but it is hardly a panacea..

ExxonMobil announced it will recover an additional 40 million barrels of oil at the Hawkins Field in northeast Texas...

Though a small part of ExxonMobil's reserves the extension of life for such a mature oil feed is at least some evidence that new technologies can help push back the reckoning of the world's "peak oil" moment.

This bit of technology should push the Peak Oil moment back by about 12 hours.

Ron -- I'm familar with the XOM program in Hawkins Field...one of my school mates was managing the project. It's been working pretty good...for almost 10 years. Not sure why they threw this out now but maybe they needed something to feed the press. Maybe we'll something from Arco soon touting their big N Slope discovery (that they made almost 40 years ago).

Just a fast question - if recoverable oil is becoming ever more expensive and hard to find, and oil companies being essentially large groups of people with experience in wrangling heavy equipment into difficult environments, obtaining energy resources, processing them and getting them to market, would it make sense for them do devote more effort to things like offshore wind, large solar installations and the like? It seems like that would be a way for them to stay working and solvent in the future. Maybe that's happening already and I'm missing it, or maybe if it's not a hydrocarbon they don't want to hear about it. Rockman, Westtexas, any thoughts?

Shell will no longer invest in renewable technologies such as wind, solar and hydro power because they are not economic, the Anglo-Dutch oil company said. It plans to invest more in biofuels which environmental groups blame for driving up food prices and deforestation.

Unfortunately, no Jim, IMHO. I know many experienced engineers and not one of them knows anything about building alts. Some cross overs on the construction side of course. Folks building offshore oil facilities could do offshore wind farms. But they aren't upstream petroleum like the rest of us. I could design solar arrays. All some one has to do is send me to school (and pay my mortgage, bills, etc), hire my inexperienced butt and train me on the job for a number of years and then I'll be able to make independent contributions...when I'm 65 yo.

But there's an even more critical issue Jim: there's very few people hiring for those positions right now. Having a work force capable of doing a job isn't important if there's no one putting a few trillion $'s on the table to start up those operations. How many folks in the US are employed in the alts right now? I have no idea. But I bet we have 1000 times more flipping hamburgers.

I do think you overstate the retraining cost. Most of the people are not that high a level, i.e. they take one of the technical training courses instead of college. I'm sure you'd find the coursework only minimally challenging. At least in California, cleantech (which includes some non-energy parts, but is mostly energy) is the fastest growing industry (not that it is large enough to turnoaround the recession).

EOS -- I was just referring to profession level folks. I think that was the point of that post. You're correct about retraining costs. Wouldn't cost much to take a reservoir engineer with 30 yrs experience and teach him how to weld. But last I saw we have a lot of unemployed welders. Auto makers would seem to have usefull alt work skills. But then you'll have tombuild those new plants in those areas or move them to where the jbs are. The sense I got from the post that it might not be too difficult to change from the ABC Oil Company into the XYZ Solar Panel Company. We all know it doesn't work like that. I think most should understand that just because a company produces one form of energy they can't readily switch to producing another form. Just like potential solutions for may of our problems IMHO: easy to do...if we had just started 30 years ago.

thanks ghung, rockman. i was thinking mostly of offshore wind, and requiring a similar skill set. but i suppose you can still make electricity out of coal, so liquid fuels are not only more valuable but also what they know. that being said, if the offshore oil and gas industry sheds jobs going forward, those people and companies are going to be looking for a way to stay in business.

gail - would it be fair to say then that we will know that the fossil fuel era is well and truly over when it's cheaper to build wind than coal?

Also, renewables aren't profitable unless some government steps in and "fixes" the system some way or other--subsidies, cheap debt, mandates for alternative use, or a high carbon tax. Unless there is a very high tax on carbon, there is no way that alternatives can compete with much lower priced fossil fuels. (I expect cap and trade would mostly move demand from coal to natural gas, unless natural gas prices are quite high.)

As Robert Rapier discussed in a recent post, in some instances, the government isn't even willing to give the oil companies a level playing field in this regard. He talks about Conoco Phillips not being able to get a tax credit for making diesel from left over chicken fat, even though non oil companies, using a different process, could get a credit.

The future of Oil and our dependence upon it is one of the most important issues of the 21st century. As oil prices have surged, two rival camps have emerged to forecast the pending Oil crisis. One claims that depletion of oil and natural gas is imminent and will be followed by global chaos, while the other predicts that if we support technological innovation and trust the free markets, humanity will be spared.
SNIP
This book may overturn all you believe about the pending oil crisis; it is set to become one of the most authoritative examinations of 21st century oil resources.

Amazon.Com has it for $43.96. Quite high in my opinion. Anyway from reading the reviews on Amazon, there are only three of them, it is clear that the author comes down squarley on the side of the cornucopians.

In contrast to previous works that have focused on advocating a particular position with respect to the "peak oil" debate, this book carefully and rigorously examines arguments on both sides of the question. From this analysis it becomes apparent that the peak oil argument in its simple form doesn't stand up to close scrutiny. It is important to note that Gorelick is by no means claiming that oil supplies are infinite. Rather, he points out that the ultimate size of these resources is poorly known, but much larger than the conservative estimates preferred by peak oil advocates.

So there you have it. A fair and balanced look at both sides decides that peak oil is a myth. And he is another analyst who apparently thinks that peak oil is all about estimated reserves rather than production rates.

Ron -- Glad you added that last paragraph...I was about to bring up Amazon. But I'll go him one point further: not only is "the ultimate size of these resources is poorly known" but it is absolutely unknown. No one knows where an oil field is until they discover it. We have a pretty good handle on what we have discovered (although the KSA et al make it a tad difficult). What I find the finnuiest is how he contradicts himself in just the one sentence("that the ultimate size of these resources is poorly known, but much larger than the conservative estimates"). IOW we have much more resources than the conservative estimates even though these resources are poorly known. Does this guy even read his own words?

Reading the commentary on AMAZON, that last quote is from one of three individuals' reviews posted as comments. The other two seem to think that Gorlick has presented a dispassionate review of the situation. Having not read the book, I can't support either point of view.

One might be interested to note that AMAZON matched Gorlick's book with Ruppert's book, Confronting Collapse: The Crisis of Energy and Money in a Post Peak Oil World, which was published about a week later...

EDIT: Apparently, Ruppert's latest is simply a re-title of hie earlier book, A Presidential Energy Policy?? I suppose a few comments from TOD regulars would help spread this latest version of Ruppert's book.

Now that both the EIA and IEA are predicting Non-OPEC to peak in 2010 I think we should have a special thread on that issue. I find it astonishing that this fact is not generating more interest in the peak oil world.

As I wrote back in November, we needed no whistleblower to deduce the absurdity of an energy agency that claims a 2010 peak in Non-OPEC–which produces 60% of global supply–while maintaining that global peak would not arrive until after 2030. That is just silly.

I bring this up today because the EIA in Washington this week, at least on the matter of Non-OPEC, appears to be in agreement with IEA that peak arrives this year.

The author, Gregor Macdonald, also writes:

Readers of this blog and subscribers to my newsletter know my view: the peak year for Non-OPEC was 2004 at a sustained annual average of 42.068 mbpd.

Has this guy been reading my posts on TOD? I have been preaching this fact for over two years.

Ron, we all exchange information and read each other's work...the links go back and forth on Twitter, too.

I can't speak for Gregor but the best way to learn about oil for me has been reading TOD for the past two-odd years. I acknowledge my sources everywhere it's practical. However, I understand that sometimes that isn't easy to do especially when the source is a comment on a blog.

Aangel, I am not complaining. It would be almost impossible for someone to acknowledge the source of everything they they post. Also I am glad the Gregor is a contributor to TOD. I will be watching for his posts from now on as well as reading all his blogs in the future.

Sears and GE Bring Energy Savings to Homeowners with Hybrid Water Heaters

LOUISVILLE, Ky. - (Business Wire) Sears, the leading retailer for energy-efficient and ENERGY STAR® qualified appliances, has made it even more convenient for consumers to save significant money on their electric bills and lessen household carbon emissions by making available the GE® Hybrid Water Heater. Providing significant savings for consumers, the GE Hybrid Water Heater is up to 62 percent more efficient than a traditional electric water heater and can save as much as $320 annually.**

[...]

Sears will have the GE Hybrid Water Heater in 475 stores across the nation by the end of January. To find out where to purchase the GE Hybrid Water Heater, consumers can visit www.sears.com or visit any Sears location and ask for the Sears Blue Appliance Crew for assistance.

Interesting Paul. Wonder what climate they used to estimate savings. When it hits 98 degrees on the Texas coast there's a lot of energy to be mined from the air. But would this be very applicable to your neck of the woods?

That's a fair question. In warmer climates such as your own it's pretty much a slam dunk, whereas things may not be so cut and dry north of the 49th.

For those who heat with electric resistance, there would be presumably little or no benefit during the heating season. Homes equipped with heat pumps would fair better as heat sacrificed to the water heater is typically one-half to two-thirds less costly than electric resistance. And for homes heated with oil, propane, natural gas, wood or wood pellet there would still be a net benefit provided these alternative fuels are less costly than electric resistance.

Addendum: Looks like Sears has some company.... Lowe's: First Home Improvement Retailer to Turn Up the Heat on GE Hybrid Water Heaters Sales

These things are apparently only easy to install if your old water heater was electric.

Our old water heater was gas, and just this week we put in an on-demand system. It wasn't a direct replacement, but since we had the gas line up there already, it wasn't all that difficult. The old one was 70 gallons (why they used one that big, I don't know), and it wasn't easy for these guys to wrestle the thing out and down 3 flights of stairs.

The old one hadn't failed yet, but it was 10 years old. Water heaters do have a catastrophic failure mode where they just let go and dump the contents all at once. I sort of viewed the thing as a time bomb given that it was up in a utility closet on the 4th floor, and it could do thousands in damage if it failed in a way that overflowed the pan.

I'd be a tad nervous having a 70-gallon water heater three floors above my head as well; sounds like you made the right call.

With respect to your first point, electric water heaters are generally found in all-electric homes and those heated by oil; the vast majority of homes with access to natural gas fall on the other side of the divide (as I recall, the split between natural gas and electric within the U.S. is just about even). It's hard to imagine why anyone would switch from gas to electric unless the supplemental cooling and de-humidification benefits are highly prized by the homeowner or unless some sort of venting issue were to arise (e.g., the tank had to be moved to another part of the house such as an inside closet).

A HPWH is an attractive option for us as our electric water heater is located in a finished basement and it would eliminate the need to run our noisy and power guzzling dehumidifier seven months of the year (the dehumidifier is the second largest consumer of electricity in our home). In addition, the impact on our space heating costs during the winter months would be negligible as the heat supplied by our ductless heat pumps is roughly one-third the cost of electric resistance.

The link to the wetlands producing Methane article made me ask this. When we started engineering wetlands into extinction what were the number of acres before we drained them compared to the number of acres of rice paddies we have now?

We can't just blaim wetlands as a cause for global warming, because they are a natural system one that has been around a lot longer than us changing things. Marshes the world over have been drained or filled in, River deltas have been contained and flood control systems used to stop rivers from their normal flooding. It seems to me without digging around for all the numbers that we have done more to reduce wetlands these past 2 centuries than we should have done.

If you total up the amount of wetlands that were here naturally, compared to the areas we only flood for rice paddies (which is not a year around thing), the natural wetlands would be more.

Wetlands need to be added to the climate modeling software mix. But we shouldn't get the wrong impression that we could slow global warming by going out there and draining all of them to offset methane production.

It makes me leary when you have to many people wanting to change natural systems to suit us, rather than us working within the natural systems to live better.

We are the ones that want to have houses close to the beach. We should be aware that the storms will hurt us more when we are that close to the tides. WE were the ones that built along rivers that flooded.

Granted water is our lifeblood, without it for 7 days and we are very close to death. Air, Water, then food, everything else is just for comfort.

But then again dikes and levies and draining of swamps had been going on a long time before we started burning Fossil Fuels.

I am reminded about the Usenet thread from ages ago, alt.pave-the-world. What simple minded fools we are at times.

I think methane is considered to be far below CO2 as a driver of current and future climate change. Of course the issue isn't one of acreage, but rather acreage, times the emissions rate per acre. The modern concern is primarily due to melting permafrost, ie. high latitude bogs, and the possibilty that thawed permafrost, which can contain may meters of organic matter can either decay (methane) or oxidize CO2. This is not considered to be a catastrophic feedback, but rather just another contributor to the positve feedback on CO2 warming.

Methane has a much larger impact on climate than does CO2 on the basis of emissions. There are a couple of terms used to describe this difference, "CO2 Equivalent" and "Global Warming Potential". Here's a discussion which includes a graph of the cumulative impact of CO2 and methane emissions from the IPCC. Other changes in the atmosphere are also shown. It's said that methane emissions have 25 times the impact of CO2 emissions. Of course, the amount of methane emissions has been smaller that CO2 emissions, but the release of methane stored in various reservoirs as the Earth warms could result in a strong positive feedback which would add further warmth, perhaps leading to much warmer conditions than that due to CO2 alone...

Methane has an atmospheric half life of about 7 years vs. multiple centuries (5 ?) for CO2. It's release can create a crisis, and perhaps a tipping point or runaway warming spike, but not long term effects (except for the additional CO2 it "decays" into).

Washington is offering nothing but higher taxes and fines and fees and more regulation. Congress is passing bills with thousands of pages of hidden bombs that will go off as the legislation is passed and implemented. Federal spending has soared amazingly, yet been ineffective except at pushing the federal deficit to incomprehensible heights, promising to double our national debt in just a few years. The interest burden this will place on average Americans is astounding. Uncertainty is the enemy of economic growth and investment, and Washington, D.C., the usual source of uncertainty, is delivering plenty of it. Confidence in our political leadership has tanked. ....

Washington has offered small businesses nothing at all. Compare that with what has been on offer to corporate giants like the Wall St. firms and GM/Chrysler. If you are a small business owner, what message would you get?

I would also 2nd Mish's conclusion:

Small businesses are the economic driver. However, big businesses get the peanuts, small businesses get the shells, and taxpayers get the shaft.

Small business conditions are as bad as they have ever been in terms of taxes, fees, regulation, and uncertainty over what inane thing Congress will do next. Such conditions do not lay the groundwork for any recovery, let alone a sustainable one.

Mish's mistake is that he thinks it's possible for a recovery to occur despite the dazzling array of mounting problems we face. So he rages against the machine and might get an aneurysm at this rate.

I wrote a comment on his blog a few days back doubting that a recovery could occur if oil stays at or above $80 per barrel. I backed it up with a my reasoning and reference (James Hamilton's paper). He chose not to publish it.

The financial types, except for TAE, think that the right policy can fix everything. In reality, there's probably not much anyone can do. But everyone wants BAU to continue...small business, taxpayers, everyone.

I've read Mish off-and-on since the days when he was posting his stuff at the Motley Fool. I tend to discount his proposals somewhat since his basic premise has always been "If you make things great for business owners, then things will automatically be great for employees and customers." That's not an unreasonable starting point for him, given that he's in the capital management business. But since non-owners are a very large majority of the economy, I do think that any analyst needs to consider them directly, not just indirectly.

That's not to say that he doesn't have some good ideas -- fixing the incoherent mess of overlapping federal/state/local regulation is a good idea no matter your perspective.

I look at things differently. The US economy isn't going to "recover", it has started into long-term decline. This decline will be a sawtooth pattern, so the people who keep looking for a "recovery" will keep on getting fooled and disappointed.

Be that as it may, the health of small businesses are important. We are in a long-term declining economy because the paradigms are changing, and what drove growth over the past century or more isn't there any more. Most of the large corporations are too invested in the old paradigm to make a successful transition to the new paradigm. Much money and effort will be wasted in a misguided and ultimately futile effort to prop them up and keep them going (as we are seeing now), but this will ultimately fail. The future economy belongs to businesses that right now are small or aren't even created yet. It is these whose health should concern us.

The more we prop up the big old dinosaurs, all we do is make it that much harder for our economy in the future.

Leanan, isn't that another way of saying stagflation? A guest on the Kudlow & Kramer show, CNBC, which I never watch purposefully, but just happened to stop at while channel surfing, was saying we are in a period of stagflation. Kudlow, a supply side - reduce corporate and wealthy tax rates proponent, tried his best to stop him from speaking his mind. He also said the Chinese have a bubble economy like we had before ours crashed, but there's he said was not as bad. (we will see). He said this stock rally has fizzled.

It just so happens, that the stock market started going down this week right at the same point of retracement that occurred after the Depression. In other words, the Depression also had a big stock market crash, then rallied (retraced) then fell precipitously again. That same scenario has played out to this point, and from history, if it is any indicator, should mean more down than up days for the stock market for several months to come.

We've argued this hear repeatedly here. Once again...I believe it's not the money supply that matters, but the velocity of money. If money isn't being spent, it might as well not exist.

Giving money to banks who just use it to offset the money that has vanished when the housing bubble burst is not going to cause inflation. Even giving money directly to people probably wouldn't make much of a difference. You'd have to give them enough money to make up for their lost home value, their lost jobs, and their lost access to credit to make up for all the wealth that's gone poof! A few extra food stamps isn't going to do it.

If you're really interested in this debate, check out Stoneleigh here.

If one was really interested in this debate, they wouldn't only read what Stoneleigh had to say. Stoneleigh and others don't see that money and credit is still being created faster than it is being destroyed. At no time recently has total US credit outstanding declined. Stoneleigh's predictions concerning the dollar, the stock market, and prices have turned out to be wrong these last six months.

When credit and money starts to contract, I will be the first to head for the deflation door. Until then ...

In the 70s, tariff barriers were still pretty high, there just wasn't nearly as much international trade. US companies were mostly thinking in terms of either manufacturing in the US for export overseas, or else opening up factories overseas to make goods for overseas markets. The idea of closing a US factory, setting one up overseas, and importing the goods to the US just hadn't occured to anyone yet, and I doubt that the economics were right for it at the time either.

Unions were more powerful back then, but mostly just in the larger industrial companies. There was a big influx of Boomers into the labor market then, so based upon what I saw and remember from living through it I really don't think that wages were the primary driver of inflation. The inflation was very much caused by money supply growth, and that in turn happened because the government's budget deficit was expanding and our balance of trade was going deep in the red due to OPEC price increases. Wage demands were pretty much a matter of trying to keep up, rather than to get ahead. Even with that, the wage increases were still counterproductive for the unions; most of them ended up just pricing themselves out of the global market and killing their own jobs.

Haiti is another black swan. take a good look. this is what post PO will look like for everyone else and soon.

man o man! all this talk about war. what a waste that we accept that paradigm. isnt there any imagination? what is the u.s. war budget? hundreds of billions of dollars every year for the last 20 years? and what do we get? machines that enable killing someone from across the globe.

ahh, if only that money was spent with real foresight.
so i beat the concept to death, just like the u.s. military machine. yet, with all that money and high tech gadgetry the u.s. doesnt seem to be able to win it's wars.

Techno lust? I have read a couple of Asimov's essays on limits to growth written in the early-mid Seventies this past week -- he was filled with techno lust. One of his solutions to population growth was to get the hell off the planet. When somebody as bright as Asimov believes in possible techno fixes, I start to doubt my espoused Doomerism. Then I wonder if Asimov reconsidered later in life since we never made any manned trips further than the Moon and my doubt disappears.

I loved Asimov's science fiction as a kid, but two realities get in the way of moving off planet as a means of solving population growth problems. (1) We can't move any significant fraction of the population to space. We still haven't got anything better than chemical rockets for getting people even as far as LEO; imagine trying to move 1% of the global population -- call it 70 million people -- that far. (2) Space is a much more hostile place to live than once believed. Turns out that our planet's big, strong magnetic bottle and 30 miles of atmosphere protect us from a lot of nasty stuff.

Granted it is a grand idea. But if we could get the money behind a project like that, we could get the same money behind changing things here on earth to not need those Hydrocarbons just yet.

We could make sweeping changes here on earth so that in another few decades when we have moved into space, we will have those resouces on Titan to expand again further out beyond our solar system.

My brother works for NASA, we've discussed things like this, both the facts and the fantasy.

Fusion power using Helium 3, is still on the drawing boards, as far as I know. Space outside of our Magnetosphere is rather harmful to humans, it is one of the issues facing going to Mars. We as yet don't have the tech all worked out to get us there and back again in one piece, even though there are some great ideas.

Again if you can go get all the Hydrocarbons you wanted on another planet, with all the effort you needed to get there, you could change a lot here on earth.

I write Sci-Fi and my ideas won't help us here much, all the great ideas still need people to do them, and the tech to grow to get there.

Big Carbon has known for over a decade now that some sort of limit was eventually going to be applied to their CO2e emissions. Of course, rather than accept this fact, and adapt, they chose to stonewall, lie, and lobby (those last two may be the same thing) for exemptions and government assistance. And they did very well, at least here in Australia, with Big Ag and all the big emitters either exempted or fully compensated for the imposition of a ETS on their business model.

But here's a crazy idea: instead of fighting an ultimately unwinnable battle (even if you get exemptions/compensation till the end of time, Fossil Fuels are a finite resource), you could diversify. Nuts, I know, but imagine it: instead of being stupid enough to negotiate yourself into a supply agreement which left you stranded if the Government didn't come to the party, you could invest in 'alternative' forms of energy! A stupid idea, I know. After all Human Ingenuity, Science!, and The Market will come to the rescue, but, just in case, on the off-chance that they don't, wouldn't it be prudent to have an insurance policy?

Beware email scams!

Beware email scams claiming to be from this site. We do not have any job openings. If anyone contacts you about a job at The Oil Drum, do not reply to them, and definitely do not give them any personal information or send them money. Read more here.

“For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled.”